City of Pontiac: Second Circuit Further Limits When US Securities Laws May Reach Non-US Securities and Issuers

In City of Pontiac Policemen's and Firemen's Retirement System v. UBS AG ("City of Pontiac"), the US Court of Appeals for the Second Circuit clarified an earlier ruling and further limited when US securities laws may reach non-US securities and issuers. Addressing two issues of first impression, the Court held that for purposes of a claim under Section 10(b) of the Securities Exchange Act of 1934, purchasing securities on a foreign exchange is not a "domestic" US securities transaction just because (i) the foreign security is cross-listed on a US exchange or (ii) the purchase order was placed with a US broker. This ruling provides welcome clarity for non-US companies issuing securities on non-US exchanges, but also highlights the significant questions to be considered in this rapidly evolving area of the law.